H&M's new pricing strategy pays off as sales skyrocket

Swedish fashion retailer Hennes & Mauritz’s sales in India during the six months ended May exceeded that of its entire previous financial year after selling merchandise at relatively lower prices than rival Zara.

H&M clocked sales of 460 crore in the six-month period compared with 445 crore during December 2015-November 2016, the financial year it follows, according to a report on its website. With about 16 stores each generating an average of 16 lakh per day in sales, H&M’s performance is among the best within the apparel space in the retail market.

Spanish chain Zara, which opened its first store in India in 2010, had set the benchmark as the fastest-growing — and now the biggest international apparel brand in India — with sales of 1,023 crore during FY16-17. Levi Strauss and Benetton, which have been around for two decades, and Marks & Spencer, which started a decade ago, had sales of 700-800 crore. Fabindia remains the biggest local lifestyle brand, with sales of 918 crore in the year ended March 2016.

“At the current rate, H&M should cross 1,000 crore in the current fiscal. The brand positioning is right in a price-sensitive market like India,” said Ruchi Sally, director at Elargir Solutions, a retail consultancy.

H&M’s sales during first six months of this year at Rs 460 crore exceeded its full-year show last fiscal.

H&M, the world’s second-largest clothing giant, had said it will open 50 stores in India with an investment of 700 crore by 2020.

The retailer stocks fast fashion items created in-house and teams up with designers for one-time collections. It keeps a large inventory of basic, everyday items sourced from places including India and Bangladesh that carry a lower price tag than most of its rivals.

In comparison, Zara emulates the latest fashion, makes affordable versions and stocks them for a very short span of time. H&M’s entry into India prompted Zara to slash prices by 10-15% for some of its merchandise last year.

As the world’s second mostpopulated country, India is an attractive market for US and European brands and has attracted some of the world’s largest private labels that are banking on young consumers increasingly embracing western-style clothing.

Ecommerce companies could have added to their sales as well, considering that apparel accounts for 25-35% of overall sales for Amazon, Flipkart and Snapdeal. Zara will launch its online store in India this October while H&M plans to enter the online market by 2018.